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UAE leads GCC in corporate bond issuances in Q2 of '14

August 14, 2014

IPO activity jumps 17 times in the region for June quarter

The UAE led the corporate bond issuances in the second quarter of 2014 in GCC while the initial public offering (IPO) activity skyrocketed by more than 17 times in the region for June quarter compared to same period last year.

The GCC debt capital markets in 2014 had an active second quarter, particularly in corporate bonds and sukuk, with large size deals that received a positive response from investors, which was demonstrated by the tight yields achieved.

UAE corporate bond issuances were dominant this quarter with more than 70 per cent of the total value in the GCC. The region witnessed $4.38 billion corporate bonds while the UAE-based companies contributed more than $3 billion.

"We saw sizable issuances from DP World Limited, issuing a $1 billion 10-year bond, and Etisalat issuing two $500 million bonds in five and ten year tranches and two $1.6 billion bonds in seven and twelve year tranches," PwC Capital Markets in the Middle East said in a statement.

The IPO market in the GCC in the second quarter (Q2) started off and ended on a high, with a total of seven IPOs, compared to two in Q1 2014. The total value of the seven IPOs in Q2 2014 was $902 million, a slight decrease of 5 per cent compared to Q1 2014, although this is a considerable increase compared to the same quarter last year where a total of three IPOs raised 48 million.

The IPO activity picked up since the beginning of 2014 in GCC as it recorded more than 381 per cent and 80 per cent jump in terms of volume and value respectively during the first half of the year compared to same period last year.

During the January to June period there were a total of nine IPOs raising $1.8 billion, compared to a total of five IPOs raising $385 million during the same period last year. "IPO performance and activity in H1 2014 and the positive responses from investors is a testament to the recovery of confidence in the market by both issuers and investors. The outlook for IPOs in the GCC appears to be strong particularly looking towards the latter part of 2014 and into 2015," PwC Capital Markets in the Middle East said in a statement.

"Equity capital markets performance in the region in the H1 2014 improved considerably Looking ahead, the remainder of 2014 looks very strong and we would expect to see this continue into 2015," Steve Drake, head of PwC'sCapital Markets in the Middle East.

"On the cross border front, the trend seems to continue with regional companies looking to list on international markets. However, Q2 2014 proved to be challenging as we saw several companies postponing their planned IPOs despite the recovery in markets," the statement added.

The second quarter witnessed its first IPO in April with the UAE-based company, Emirates REIT (CEIC) Limited, listing on Nasdaq Dubai Limited and raising $201 million. Also in April, Marka, another UAE-based company, listed on the Dubai Financial Market (DFM) raising $77 million.

The Saudi Arabian Stock Exchange, Tadawul, witnessed three IPOs in Q2 2014 by Umm Al Qura Cement Company, Abdulmohsen AlHokair Group for Tourism and Development Co and Al Hammadi Company for Development and Investment raising $73 million, $220 million and $168 million, respectively. In Oman, there were two power company listings, Al Suwadi Power Company SAOG and Al Batinah Power Co SAOG, raising $84 million and $78 million, respectively.

"DCM [debit capital market] in the GCC has grown and continues to grow as demand for debt remains strong. In Q2 2014, we saw sizable issuances, many of which were oversubscribed. The debt market in the region is expected to continue to flourish due to factors such as government spending, development of new projects and macroeconomic conditions, to name a few. However, there still remains an element of risk or uncertainty in the region as a result of the political unrest in the Middle East, which can contribute to the risk premiums seen on regional issuances," Drake said.

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Source: Khaleej Times (United Arab Emirates)

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